Daily Development for Thursday, August 12, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu
LANDLORD/TENANT; CONSTRUCTION OF LEASE: Ambiguous lease provisions regarding the
effect of real estate tax and decreases on rent due will not be construed
against the landlord even if the landlord was the initial drafter of the lease.
Citibank v. 666 Fifth Ave. Ltd., 769 N.Y.S.2d 268 (A.D. 1 Dept. 2003).
The question was whether a reduction in the property taxes allocated to tenant
could lower the rent below the original fixed rent figure, or whether such
reductions would be applied only to prior escalations in the fixed rent. The
court concluded that, although the lease was ambiguous, evidence of custom in
the industry, post execution conduct of the parties, and testimony of one of the
negotiators were sufficient to conclude that the rent could not go below the
original fixed rent, despite the effect of property tax reductions.
The tenant argued that the landlord had drafted the lease, and that therefore
ambiguities in the lease should be construed against the landlord. The court
rejected this premise. It noted that extensive lease negotiations had been
conducted by two sophisticated entities as landlord and tenant. The tenant
failed to show that it “had no voice in the selection of [the leases’]
language”, and therefore, even though the landlord did the initial drafting of
the lease, the ambiguous provision could not automatically be construed against
the landlord.
Comment: This is apparently not an unprecedented ruling in New York, but the
editor notes it because it focuses on a rule that is a favorite whipping boy of
the editor. Although, of course, where one party to a transaction insists on a
preset form of its drafting, it should be responsible for ambiguities, this
presumption of responsibility should go away once it is shown that both parties
had an opportunity to bargain concerning the terms of the agreement. The fact
that they elected not to discuss a particular paragraph should be an indication
that both found it satisfactory, not an indication that one party controlled its
terms.
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